The troubling flaws in how we select experts.

Organizations are constantly scouring the earth for the talent or perfect expert that will provide the fresh edge and perspective needed to overcome the challenging obstacles that stand in their way to the top. In their pursuit of excellence however, you may be shocked to learn the criteria they use to define credibility and expertise may be severely flawed.

Many of us can think to a time we made a recommendation to a boss, superior or heck, even a family member only to be completely brushed off. I know I’ve been in this boat before. It’s frustrating, but the problem goes beyond simple indifference. Almost 25 percent of workers are ignored at work. What’s more frustrating is when suggestions or advice are ignored but implemented later — with much fanfare — only when presented by an outsider or highly paid expert. Why are these recommendations perceived as bad ideas when suggested by employees, but suddenly brilliant when a lesser known individual suggests the same thing? Why are these outsiders perceived to be more credible? One reason may their anonymity.

If this sounds irrational, I’d agree with you. The degree to which we know and trust someone should enhance their credibility, after all they have an intimate understanding of our challenges. Unfortunately, the scenario doesn’t typically play out that way. Instead distant individuals are the ones that are perceived as more credible. In the words of Mark Twain, “An expert is an ordinary fellow from another town.” Could anonymity actually be to that individual’s benefit?

I spoke with Dan Ariely, the two-time New York Times best-selling author, professor at Duke University, and noted researcher on irrational behavior. Not only does Ariely believe this bias is real, but he points to the underlying reason it exists. “Often, people give more benefit of the doubt to people who are coming from the outside,” he told me.

Interesting evidence for this phenomenon can be found in Ariely’s studies in online dating. After narrowing down factual options, instead of being cynical about others on a particular site, participants were remarkably optimistic in their view of complete strangers. Because they know very little about a person, Ariely discovered they interpreted that relational ambiguity in pretty much any way they wanted to. For example, if someone were to tell their potential date they liked music, Ariely told me the other was likely to just assume that their interests were similar, instead of perhaps stopping to think that perhaps their date’s music preference would be repulsive.“When people know little about a person, they appreciate them in a higher degree,”Ariely said. This problem scales up far beyond online dating however.

In yet another study Ariely conducted on salaries given to chief executives, the study showed a trend that CEOs who come from the outside tend to get higher figures compared to CEOs hired from the inside. “People have more faith and trust in CEOs hired from the outside, ”Ariely said. “In fact they prefer them.” So, are all the CEOs coming from the outside consistently more qualified than the ones already experienced in the company? Are they more devoted to the company? Not exactly.

In the journal Administrative Science Quarterly, Matthew Bidwell, assistant professor at the University of Pennsylvania’s Wharton School, discovered while external hires get paid up to 20 percent more, their performance reviews were worse than their internal counterparts. To add insult to injury, these highly paid outsiders, were 21 percent more likely to ditch the company that paid so handsomely to hire them, and were also 61 percent more likely to be laid off or fired.

People tend to fill in these mystical character gaps in ways that favor the unknown individual. So, it makes sense when you fill these gaps with pixie dust and rainbows, this results in a pretty impressive individual, and a very skewed comparison. After all, what normal individual can stand up against an outsider or expert made up of pixie dust and rainbows? “When we don’t know much about somebody, we are more free to interpret their actions,” Ariely explained. “We are positively disposed to think about people in over-optimistic ways, leading us to have this bias.” In other words, when we go looking for a better expert or the next best thing, we tend to find them, even when they don’t really exist.

Why then do we keep falling into this error? Why do we pay for lesser advice from unknown outsiders? Francesca Gino, a professor at Harvard Business School and author of Sidetracked, conducted an interesting study that may tell us why. It’s as simple as attaching a dollar sign to the advice given.

“When you pay for advice, whether it’s from a doctor, lawyer, or business consultant, you can be confident that you are accessing expert information. Yet my research shows that we are not especially focused on the quality of the advice for which we pay. Rather, the cost of the advice weighs more heavily in our decisions, even when free advice is of the same quality,” Gino said. Even though external talent delivers the same advice internal employees in the same roles have given, it is perceived as more credible, for the simple reason it was paid for!

It turns out, the people we should trust most, who have a unique understanding of our situation, are overlooked. Instead we favor distant and more expensive individuals, whose results are proven as poor. I call this phenomenon “The Nazareth Factor,” referring to an interesting Bible story from Mark, Chapter 6. After experiencing celebrity-like welcomes from city after city, Jesus is completely rejected when he returns to those he knows closely in his hometown. My favorite quote in this section sums it up:

What’s this wisdom that has been given him? What are these remarkable miracles he is performing? Isn’t this the carpenter? Isn’t this Mary’s son and the brother of James, Joseph, Judas and Simon? Aren’t his sisters here with us?” and they took offense at him.

It’s obvious the implications of the Nazareth Factor are quite significant. The employees or friends that truly have a intimate understanding of your challenges are the least likely to have their ideas heard. This has tragic results, leading to employee disengagement. Disengagement destroys creative potential and overall, it’s quite costly.

Gallup found that when employees ideas are ignored, 40 percent become disengaged, and this ends up costing U.S. companies $450 to 550 billion annually. This rejection creates jaded employees and today, 70 percent of employees simply don’t speak up with relevant advice they have that could save their company time or money. Trusting the team you’ve put in place is critical because they have a greater understanding of the problems you deal with on a daily basis (and not to mention they’re drastically cheaper).

I’m not saying hiring outsiders is always a bad idea, there are good reasons, but the evidence shows how catastrophic ignoring the internal talent you have is. Many leaders or teams believe their biggest challenge is simply finding that one genius who has all the answers, but in many cases that ground breaking hero or heroes are already in your midst. What if your predisposition to favor outside and unfamiliar help, has caused you to overlook a Jony Ive in your very own organization?

Tangerine can relate. They are an award-winning design agency based in London. They design products from cell phones to the kitchen sink and have worked with big brands such as LG, Samsung, Toyota, Ciscso and others. It turns out, they had the Jony Ive working at their company.

For years Ive’s work went largely unappreciated by the clients Tangerine served. In 1992, even into his career at Apple, his innovative designs just piled up. Going unnoticed for years, he started contemplating leaving the company that he escaped to. Not until Steve Jobs returned to the company in 1997 did all his designs receive the recognition they deserved. Ive had been there all along, but no one had noticed.

Employees, friends and family are disregarded daily for irrational and foolish reasons. So I wonder, whose potential could you be ignoring?